Agribusiness vs. food security

The food crisis and the IFIs

17 June 2008

The causes of and remedies for the food crisis are hotly contested; how this rupture in the status quo is resolved will have decisive implications for the roles of the IFIs as well as more broadly for global food security and ecological sustainability.

The UN estimates that the recent food price increase will add 100 million to the over 850 million people who were already short of food. The IFIs trace 15 per cent of the increase to higher energy and fertilizer costs linked to skyrocketing oil prices, and another 15 – 30 per cent to the impact of biofuels. They have been silent on the role of speculative financial capital, which Peter Rosset, researcher at the Centro de Estudios para el Cambio en el Campo Mexicano, calls “one of the most important” short-term causes. Other short-term factors include record-low food stocks and severe weather events such as last year’s Australian drought.

Commentators are agreed that food production, especially in many developing countries, has failed to keep pace with rapidly growing demand. One factor being blamed for this failure is a two-decade-long across-the-board decline in support for investment in agricultural productivity. Multilateral aid to African agriculture, for example, fell from 32 per cent of total aid in 1981 to a mere seven per cent in 2001, as highlighted by the Bank’s evaluation unit (see Update 58).

This is one of the main factors in the current food crisis, for which the IMF is directly to blame

US and EU food subsidies, combined with WTO and IFI pressure for import liberalisation are being blamed by numerous NGOs, academics, and southern governments for hurting countries’ abilities to feed themselves. Henk Hobbelink of NGO GRAIN said “many countries became dependent on food imports, as local farmers could not compete with the subsidised products from the North. This is one of the main factors in the current food crisis, for which the IMF is directly to blame.”

Indian UN ambassador Nirupam Sen blamed IFI advice encouraging countries to shift from domestic food crops to cash crops for exports. In a paper for the Nordic Africa Institute, Oxford University researcher Deborah Bryceson describes the IFIs’ approach as “de-peasantization” – phasing out of a mode of production to make the countryside a more receptive site for intensive capital accumulation.

Harvard University economist Dani Rodrik counterargues that the retention of import restrictions would have lowered the global supply of food, not raised it. He surmises that import protection would have led global production to be reallocated “from efficient exporters to inefficient importers”. He concludes that “if you are for self-sufficiency, you must be willing to live with high prices”.

This reflects the complexity of the relationship between food prices, the nature of development, and poverty reduction efforts. The latest World Bank research by Maros and Will paints a mixed picture: “short-run impacts of higher staple food prices on poverty differ considerably by commodity and by country, but, poverty increases are much more frequent, and larger, than poverty reductions”. Other analysts believe that in the longer-term, higher prices could begin to benefit rural producers, slow the exodus of farmers from rural areas, and improve environmental sustainability.

The World Bank has swiftly seized upon the crisis to broaden its mandate. A $1.2 billion “rapid financing facility” has been created to address immediate needs, including $200 million in grants targeted at the poorest countries (grant operations have been approved for Haiti, Djibouti and Liberia; operations are being processed for Togo, Tajikistan and Yemen). This is not new money but has been re-allocated from existing budgets.

The Bank is also working with the UN’s Food and Agriculture Organisation (FAO) to get seeds and fertilizers to those developing countries where smallholder farmers could expand production this season. The Bank says it will boost overall support – including loans, grants and technical assistance – for agriculture to $6 billion next year up from $4 billion. It also promises to launch new risk management tools and crop insurance.

For its part, the IMF has doubled lending to four low-income countries (Burkina Faso, the Kyrgyz Republic, Mali, and Niger), and is discussing increases with another eleven. The Fund’s board was to review in June a proposal for improving the effectiveness of the Exogenous Shocks Facility (ESF), a low-interest fund for low-income countries suffering the painful short-term impacts of events beyond their control (see Update 49). As with the Bank, it will be critical to monitor the conditions that accompany these funds and the increased debt levels they entail.

Meanwhile, the IFIs have published a list of dos and don’ts for developing country governments responding to the crisis. On the do side: scaling up social safety nets; eliminating tariffs on key food items; and the temporary use of subsidies on food items vital to the poor and inputs for poor farmers such as fertilisers. The latter recommendation represents a 180 degree shift from previous efforts to eradicate the use of such subsidies in countries such as Malawi. On the don’t side are export controls, price controls and general subsidies.

The IFIs have proposed a package of medium-term measures including:

  • doubling investment in research and development over the next five years (conceding the inadequacies of the global network of Consultative Group research centres);
  • investing one per cent of sovereign wealth fund (see Update 57) assets across Sub-Saharan African, some of which may go towards agricultural productivity;
  • easing bio-fuel subsidies;
  • completing the Doha trade round; and
  • a ‘green revolution’ for Africa – the Bank is considering joining the Alliance for the Green Revolution in Africa, a body that is funded jointly by the Melinda and Bill Gates Foundation and the Rockefeller Foundation.

While most civil society organisations would agree both on the need for increased investment in research and the need to end bio-fuel subsidies, that is where the similarities end. NGO Institute for Agriculture and Trade Policy insists that the Doha round would lead both to increased dependency of poor countries on food imports, and increased volatility in food prices.

There is also enormous skepticism about the benefits of the current agribusiness model. The International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD), a three-year high-level exercise, came under “enormous pressure” according to one high-level insider to conform with the findings of the Bank’s World Development Report on agriculture (see Update 58). In contrast to the WDR, the IAASTD emphasises food security, environmental sustainability, and traditional knowledge. It criticises trade liberalisation for undermining the agricultural sector and stresses the need to “preserve national policy flexibility”.

La Via Campesina, an international peasant movement, proposes replacing the current model with one based on the notion of food sovereignty – the right of a country to determine its production and consumption of food and the exemption of agriculture from global trade regimes. They are one of the signatories to a global civil society statement on the world food emergency. It calls for: the UN Human Rights Council and the International Court of Justice to investigate the contribution of agribusiness to violations of the right to food; the establishment of a UN Commission on food production, consumption and trade; and the restructuring of multilateral organisations involved in food aid and agriculture, including the World Bank.